$1.37B in Loan Guarantees for BrightSource Solar Project

How does a growing solar company bridge the chasm from demonstration facility to utility-scale energy production plant in a weak economy and a troubled project finance environment?

BrightSource Energy, the VC-funded solar thermal hopeful is doing it with $1.37 billion in loan guarantees from the U.S. Department of Energy.

The startup received conditional approval today for their Ivanpah project which would be the first new solar thermal plant built in California in almost twenty years. The project is notable as one of the world's largest solar projects at hundreds of megawatts of power -- capable of electrifying more than 100,000 homes while providing hundreds of jobs and hundreds of millions in tax revenues over its 30 year lifetime.

It's a milestone for BrightSource and answers a lot of questions about the fate of that firm, the future of solar in the U.S., and the viability of VC-funded solar.

The loan guarantee was through the Department of Energy’s Title XVII loan guarantee program, which was started in 2005 under the Energy Policy Act to support commercially proven technology.

In a mild refutation of the rooftops versus deserts debate, the Brightsource project is solar on a massive scale. The project, in southeastern California, is approximately 400 megawatts of solar power from three separate solar thermal power plants.

The power generated from these solar plants will be sold under contracts with Pacific Gas and Electric (PG&E) and Southern California Edison (SCE). PG&E will purchase about two-thirds of the power generated at Ivanpah and SCE will purchase approximately one-third. BrightSource’s contracts with PG&E and SCE total 2.6 gigawatts.

Bechtel,will serve as the engineering, procurement and construction (EPC) contractor for the Ivanpah Solar Electricity Generating System. Bechtel Enterprises, Bechtel's project development and financing arm, is also an equity investor in the Ivanpah solar power plants.

When you hear the name Bechtel in the same breath as a solar startup, it's proof that solar has entered the realm of big money, big projects and utility-scale reality. Last year, Bechtel signed a project labor agreement with the State Building and Construction Trades Council of California to ensure that California’s local workforce benefits from the project.

There's another debate about solar that pits environmentalists and politicians against more environmentalists and more politicians.

BrightSource recently bowed out of a project in the Eastern Mojave in an area that may receive the national monument designation. BrightSource had been set on developing a 500-megawatt solar thermal power plant on part of Broadwell Dry Lake but decided to stop the project a few months ago. The decision came after U.S. Sen. Dianne Feinstein said she would push for legislation to turn the lake area into a national monument, a designation that would prevent any alternative energy development.

BrightSource seems to be picking its battles carefully and playing the political aspect of large-scale project development with some finesse.

The Ivanpah project is scheduled to begin construction in the second half of 2010 following permitting by the California Energy Commission and the U.S. Department of the Interior’s Bureau of Land Management.

The Ivanpah Facility uses BrightSource Energy’s Luz Power Tower technology. Electricity is generated the same way as in traditional power plants -- high temperature steam turns a turbine. Thousands of mirrors are focused on a boiler filled with water that sits atop a tower. When sunlight hits the boiler, the water inside is heated and creates high temperature steam. The steam is then piped to a conventional turbine which generates electricity.

Technology development is important in renewable energy. Solar has to work and work at the right price. But political will and financing tools have to be in place to make big solar work and today's announcent is a positive step in that direction.